The Importance of Being Importer Friendly

PART I

We all realize the importance of trade and commerce and most of us are aware of the World Trade Organisation (WTO), the only global international organization dealing with the rules of trade between nations[1], formed in 1995. The WTO replaced the General Agreement on Tariffs and Trade (GATT), an agreement signed in 1947. The replacement now has four major documents: a major revision of the original GATT, General Agreement on Trade in Services (GATS), The Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS), and the Dispute Settlement Understanding (DSU).

Until then, the GATT set out important rules governing trade between countries, and had been the forum for negotiating lower customs duty rates and other trade barriers. Since 1995, the updated GATT has become the WTO’s umbrella agreement for trade in goods.[2] Article VIII of the GATT 1995, in particular caught my attention. You can read the Article here. The Article basically states that countries that are a part of the WTO, must ensure that the importers or exporters must not be subject to too many burdensome formalities and requirements.

This was when I thought, how easy is importing for our own importers? The GATT seeks to prevent one country’s protective measures against another. But what about the importers within the same country? There are importers I know, who, despite living in Kolkata, which is closer by sea to Hong Kong (where they import goods from), route it through other cities, like Mumbai, despite the round-about route, simply because it is less burdensome, faster, and people are generally more eager to work.  So which states are most businessman friendly, especially when it comes to importing?

Let us look at the overall figures. Gujarat stands at the top of a number of lists[3]. According to the Economic Freedom of the States of India Report- 2013, Gujarat is not only the freest state, but it has also registered the fastest rate of improvement with an average growth of 12%.[4] In the same report in 2005, its overall score was 0.46 (Rank 5), which is 0.65 (Rank 1) in 2013. There is also a very wide gap between Gujarat and the second in rank, in the report (Tamil Nadu, with a score of 0.57). In a report by the CLSA[5], the reasons that Gujarat seems to be doing so well is that: firstly, unlike the other states who jumped from an agrarian economy directly to a service sector centric economy, Gujarat made sure that it has many manufacturing industries, which provide for large scale employment. Even so, it did not ignore its agrarian sector. The report goes on to say, that agriculture contributes 13 per cent to Gujarat’s GDP and supports 53 per cent of the population. Yields in food grains are almost double the country’s average. Secondly, its long coastline and entrepreneurial nature of its people are certainly a plus. Thirdly, its dependence on funds from the centre has been low, with 84% of its revenue coming from taxes. Also, the report point out, Gujarat does not ignore the expenditure on medical and educational facilities by replacing it with social security in welfare, a mistake made at the national level.

In the Economic Freedom report, Gujarat and Tamil Nadu are followed by Andhra Pradesh, Haryana and Himachal Pradesh.

It is believed that Tamil Nadu is ranked so high up, because of the effective legal machinery. With a low rate of dacoity and robbery reported in 2012 (no cases, according to the National Crimes Records Bureau); people in general afraid to break the law; bribes being low, and sometimes nil; zero tolerance for communal violence; and swift arbitration and conciliation, Tamil Nadu, many believe[6], deserves to stand at Rank 2. However, its points get docked when it comes to its high rate of labour disputes and severe shortage of power, to which there seems to be no solution so far.

The regulation of labour and business is a very important factor for a businessman, which is one of the three factors the Economic Freedom Report looks at.[7] Gujarat has been rank 1 since 2005, till 2013[8]. Tamil Nadu, Himachal Pradesh, Uttarakhand, Karnataka, Maharashtra and Kerala follow respectively.[9] Once again, there is a very large gap between the score of Gujarat and Tamil Nadu, making Gujarat the most conducive for business in this category, without question. According to the report, there has been a sharp decline in man-days lost due to strikes, higher market wage rates, and a decline in pendency of cases.[10]

As for Andhra Pradesh, which ranks 3rd in the report, it seems to be by virtue of it being a large base for Agro and Food Processing (especially since the state accommodates seven different agro-climatic conditions); the “mineral house of the country”; the “bulk drug capital” of the country, with 1/3rd of the country’s Bulk Drug Production; and a huge IT economy.[11] However, with the state being split into two,[12] we have to see how things will work out for each of the two new states.

In my next blog post, I will be concluding my article after looking at how individual cities fare at treating importers.

PART II

In my previous blog post, I discussed the import-friendliness of states. Let us now look at the performance of individual cities and where India stands as a nation, and why all this matters.

When it comes to ease of importing in cities, Bhubaneswar seems to be the friendliest city, according to the Doing Business Report by the International Finance Corporation and the World Bank[13], with 16 days taken to import goods.[14] Ahmedabad does come a close second with 18 days taken to import. The costliest city according to the report is Jaipur (at US$1,384 per container).[15] A clothes merchant based in Kolkata, who wishes to remain anonymous, told me that Chennai and Vishakapatnam are also very friendly when it comes to imports. He categorically states that Kolkata is quite hostile to importers. The Kidderpore port in Kolkata, for instance, is badly maintained and under-utilised. There seems to be an unwillingness to create a business friendly environment, he said, labeling the attitude as “babu-giri“.

India doesn’t seem to fare that well in the world, being ranked 48 according to Bloomsberg Ranking[16]; Rank 98 according to Forbes[17]; and Rank 134 in the Doing Business Report 2014[18]. The Doing Business Report puts India at Rank 132 for ease of trading across borders, a 3-Rank fall from the previous year. It takes 11 documents, on an average, to import something into India, compared to 10 for the South Asian countries and 4 for the OECD.[19] It takes an average of 20 days to import something into India, while it takes on 10 days for the OECD.[20]

India’s economic freedom has undoubtedly increased since the 1990s, yet India’s ratings remain low on the global index. As the Economic Freedom report rightly states, as India opens its national markets to international investment and commodity flows, it cannot afford to constrain its own entrepreneurs. India is a very centralized country, especially compared to China.[21] Yes, we use the phrase “centre-state relations”, but as the report has correctly pointed out, it “reflects a patronizing mindset, suggestive of a centre and a periphery”. Perhaps this is a legacy of our independence struggle, one which we seem to have inherited unknowingly, due to the predominance of a single party back then.[22] Ironically, the “Centre” so far seems to suffer from a lack of interest and/or ability to change things, thus putting the burden on the “states”.

With the reported increase in imports[23], it is high time that the “centre” learns something from the leading states and implements the same. With US$489 billion worth of imports, India is ranked the 10th biggest importer in the world, by the WTO, accounting for 2.6% of the world’s imports.[24] You can see how much of each product India imports here. You can also check out the import tariffs for agricultural products here.

The WTO realizes how important it is to protect its members from harassment in the form of delays and unnecessary rules. It is time we realize the same. Is the proposal of letting the Major Ports decide tariff rates going to serve this purpose?[25] Maybe, maybe not. Perhaps, with the ex-CM of the leading state of Gujarat as our new Prime Minister for the next sixty months, we might see some improvement for the importers. The Modi government promised the country: achhe din aane waale hain (Good days are going to come). Only time will tell how good the days of the future are going to be. We can only hope and wait for them to fulfill this promise of theirs.

[1] As per the website, www.wto.org.

[2] http://www.wto.org/english/thewto_e/whatis_e/inbrief_e/inbr03_e.htm

[3] See, for instance thisthis or this. You could also read this article, which gives five things that make Gujarat different from other states.

[4] Economic Freedom of the States of India Report- 2013, Bibek Debroy, Laveesh Bhandari, Swaminathan S. Anklesaria Aiyar. Available at http://www.cato.org/sites/cato.org/files/economic-freedom-india-2013/economic-freedom-states-of-india-2013.pdf.

[5] See http://www.business-standard.com/article/economy-policy/five-reasons-why-gujarat-is-different-from-other-states-clsa-112101603014_1.html for five things that make Gujarat better than the other states.

[6] See http://www.rediff.com/money/slide-show/slide-show-1-column-why-tamil-nadu-is-one-of-the-best-states-for-doing-business/20131209.htm#1

[7] The report looks at the size of the government: expenditures, taxes and enterprises; legal structure of the state; and regulation of labour and business in the state, and awards points accordingly.

[8] With a score of 0.87.

[9] Scores: 0.51, 0.46, 0.46, 0.44, 0.43, 0.42 Respectively. See Table 1.6 of the Report.

[10] Page 34 of the Report.

[11] Read the detailed report by Commiserate of Industries and FICCI on how Andhra Pradesh is a great state for business here.

[12] See http://www.business-standard.com/article/politics/telangana-foundation-day-on-june-2-114030500314_1.html.

[13] See http://www.doingbusiness.org/ in general, and http://www.doingbusiness.org/data/exploretopics/trading-across-borders/india in particular.

[14] See how the time and all related parameters are calculated here

[15] However, this could be because the report takes into account goods imported by sea transport.

[16] See http://www.bloomberg.com/visual-data/best-and-worst/best-for-doing-business-countries.

[17] See http://www.forbes.com/best-countries-for-business/list/.

[18] See http://www.doingbusiness.org/rankings.

[19] See http://www.doingbusiness.org/data/exploreeconomies/india#trading-across-borders

[20] The number takes into account: Documents preparation; Customs clearance and technical control; P orts and terminal handling; And Inland transportation and handling. The documents considered are: Bill of Entry, Bill of Lading, Cargo release Order, Certificate of Origin, Technical standard Certificate, Commercial Invoice, Foreign Exchange Control Form, Inspection report, Packing list, Product manual and Terminal handling receipts.

[21] Bardhan, Pranab (2010). Awakening Giants, Feet of Clay, Assessing the Economic Rise of China and India. Oxford University Press, in the Economic Freedom of States in Inida Report (Page 73).

[22] For more on this, see Report of the Commission on Centre-State Relations, available at http://interstatecouncil.nic.in/volume1.pdf

[23] India’s imports gained while exports grew negligibly from FTAs: ASSOCHAM study. Article available here.

[24] See Appendix table 3 here. Also see a detailed report on India’s imports and exports, by The Guardian here.

[25] http://articles.economictimes.indiatimes.com/2014-02-02/news/46923648_1_major-port-trusts-tamp-new-tariff-guidelines

By Ashwini Tallur

IBC Amendment and IBBI Regulations on Pre-Packaged Insolvency Resolution Process come as boon to MSMEs

The Central Government, on April 4 2021, by way of an Ordinance titled ‘Insolvency and Bankruptcy Code (Amendment) Ordinance 2021’, amended the Insolvency and Bankruptcy Code 2016 (IBC) to introduce the concept of Pre-Packaged Insolvency Process (PPIP). The Ordinance inserts a new chapter (III-A) to the IBC and provides for making an application for initiating PPIP with regards to a micro, small or medium enterprise (MSME) in light of the impact that the pandemic has had on businesses, financial markets and economies all over the world. The Ordinance is a welcome step towards the resolution of insolvent MSMEs. The objective of the Ordinance states that the PPIP for MSMEs has been introduced to provide them with an efficient alternative insolvency resolution process that will achieve value maximization in a quicker and cost-effective manner while causing the least disruption to the business.


Due to the simpler corporate structure of the MSMEs, Corporate Insolvency Resolution Process (CIRP) for reorganization is considered a tedious task which when dragged out leads to disruption in business. To overcome this problem, the PPIP mechanism has been introduced which will function as a hybrid framework blending both formal and informal processes within the basic mechanism of the IBC.

On 9th April 2021, the Insolvency and Bankruptcy Board of India notified the PPIP regulations for MSMEs. The regulations detail the forms that stakeholders are required to use, and the manner of carrying out various tasks as part of the pre-pack resolution process. It also provides details about various aspects, including eligibility criteria to act as a resolution professional, identification and selection of authorised representative, competition between the base resolution plan and the best resolution plan. 


The process can be initiated by the corporate debtor (CD) who will have to serve notices of a meeting to all unrelated financial creditors five days in advance, in order to seek their approval. The regulations prescribe at least 66% approval from the creditors. The Creditors will then have seven days to raise their objections to the notice of claims submitted to the resolution professional by the CD.


The resolution professional must necessarily be independent of the CD. This means the resolution professional and all partners and directors of the insolvency professional entity, of which they are a partner or director, have to be independent of the corporate debtor. If the concerned insolvency professional entity or any of its partners or directors represent any of the stakeholders, the person will be ineligible for being appointed as a resolution professional.


Another highlight of the PPIP is that it enables the management of affairs of the corporate debtor to continue to be in the hands of the Board of Directors or partners of the CD. This is in stark contrast to the CIRP, where the resolution professional is handed the reigns along with the assistance of the financial creditors. Creditors still have the option to initiate bankruptcy proceedings against the MSMEs under the CIRP.


After approval from the unrelated creditors, the CD will proceed with filing an application before the National Company Law Tribunal (NCLT) to initiate the PPIP, after taking a mandate from the directors and shareholders. The plans must be submitted within 90 days and the NCLT must approve of such plans within 30 days. The whole process will be completed within 120 days as opposed to the 270 day time period prescribed for the CIRP. Once the application is admitted by NCLT, the CD will itself first provide a Base Resolution Plan and if such plan is unsatisfactory, the resolution professional will publish an invitation for resolution plans within 21 days of the commencement of formal proceedings.


The Pre-Packaged Insolvency Resolution Process makes the debtor the only person capable of triggering the bankruptcy process. This scheme will yield faster resolution than the CIRP and will also reduce litigation, triggered by defaulting promoters, while simultaneously cutting costs. The process is also expected to run smoother due to the requirement of 66% approval from unrelated creditors. If the NCLT infrastructure is improved by the government, this ordinance is a welcome step in the corporate world as it will genuinely lift the weight off the shoulders of MSMEs.

By Adil Zawahir

Fast track insolvency procedure

Closure of a business in an efficient, timebound manner and with less burden on the owners is the aim of the Fast Track Insolvency Process under the Insolvency and Bankruptcy Code. Read on to know more and for any issues related to the closure of your business, connect with Flywork.io.

Introduction:

When a company/business debtor (Corporate Debtor) is unable to continue daily operations in a business, he/she files for insolvency, which further results in formation of plans to repay the creditors, employees, workmen, etc. The maximum number of days needed to complete the resolution procedure under the Insolvency and Bankruptcy Code, 2016 is 270 days. This is not very practical for business/companies which have a smaller line of business, as the creditors involved in a small-business enterprise is low compared to that of a bigger company. Faster settlement would lure buyers to small businesses and start-ups, the majority of which do not last long. Thus, in order to eliminate the unnecessary delay induced by a small-scale company’s insolvency the Government introduced a quicker option to complete the Corporate Insolvency Resolution Process (CIRP), i.e., Fast-track Insolvency Procedure under the Sections 55-58 of the IBC, 2016 read with the Insolvency and Bankruptcy Board of India (Fast track Insolvency Resolution Process for Corporate Persons) Regulations, 2017.

Sections 55 to 58 of the Code of 2016 were added to resolve the issue of undue delay in insolvency proceedings involving small businesses; the fast-track insolvency procedure takes 90 days to complete from the insolvency filing date. The time period for settlement can be extended only once by the Adjudicating Authority upto a period of 45 days, if it thinks fit, subject to support by voting share of at least 75% of the Committee of Creditors.

Process:

The following is the procedure to be followed under the Insolvency and Bankruptcy Code, read with the Insolvency and Bankruptcy Board of India (Fast track Insolvency Resolution Process for Corporate Persons) Regulations, 2017 –

Sl. No.StepExplanation
 Appointment of Resolution Professional Only an Insolvency Professional (IP) who has no relationship with the corporate debtor is qualified to be appointed as a resolution professional. In order to be appointed as a resolution professional, the insolvency professional must be self-sufficient/independent. At the time of his nomination, the insolvency professional must declare his independence at the time of appointment. 
 Public Announcement After being named as an interim resolution professional, the insolvency professional must make a public statement within three days of his appointment. The public notice must be distributed in one English and one regional language newspaper that is commonly distributed in the location of the corporate debtor’s registered office and principal office. A corporate debtor’s website and the board’s website would both have the same official announcement. 
 Claims – Submission, Verification and Proof of claims  The interim resolution professional shall provide 10 days to provide proof of claim. Operational creditors, financial creditors, workmen, employees, and other creditors must provide evidence of their statements in the specified forms, along with any additional documentation or clarifications.
When applications are submitted, the resolution professional must validate them within seven days of the claim submission deadline. After that, the resolution professional will create a list of creditors. 
 Formation of a committee of Creditors The resolution professional would assemble a group of creditors made up of the corporate debtor’s financial and operational creditors, which shall be known as the Committee of Creditors (CoC). The CoC will constitute only operational creditors if the corporate debtor has no financial debt or if the financial creditors are an associated party (related party) of the corporate debtor. 
 Meeting of the committee of creditors Within seven days of filing the paper, the resolution professional must call the first meeting of the newly formed committee of creditors. Following that, the committee will meet at any time if and when it is required. After receiving a vote of 33 percent voting share, the resolution professional will call a meeting of the committee at the request of committee members. The meeting notice must be sent at least seven days before the scheduled meeting date. The meeting notice must be in writing and sent to members either by hand, by speed post, or online. 
 Conduct of the fast-track process Under Section 26-29 of the Regulations, the Resolution Professional, within seven days of his appointment, must select a registered valuer to determine the liquidation value of the corporate debtor. After personally checking the inventory and fixed assets of corporate debtors, the registered valuer shall apply an indicative liquidation value. 
 Formation, approval and submission of the Resolution Plan The resolution plan must include the steps that must be taken to put it into action. The resolution plan must be written with the requisite mandatory material in mind. Under the time frame, the resolution applicant must apply the drafted resolution plan to the resolution professional. The resolution professional would then present the shortlisted resolution plans to the Committee of Creditors, for approval. The committee has the authority to approve any resolution proposal, with or without changes, as it sees fit.The resolution applicant must apply the authorized resolution plan, along with all appropriate certifications, to the adjudicating authority. On receipt of the resolution plan, the adjudicating authority must issue an order approving or refusing the resolution plan. 

Conclusion:

However, the fast-track process does have a few setbacks, for example, failure to complete the Fast-track procedure within 90 days (or with an extension of 45 days, depending on the approval of the Adjudicating Authority) will lead to initiation of liquidation process, which is disadvantageous to the corporate debtor, i.e., it destroys organizational capital and renders resources idle till reallocation to alternate uses. Another challenge regarding the procedure is whether 90 days is sufficient for the entire CIRP to be completed as the efficiency of the same depends on the resolution plans, approval by the CoC, etc. 

The Fast-Track Corporate Insolvency Resolution Process is a great initiative to target a particular segment of corporate debtors against which creditors or the corporate debtor himself may begin insolvency proceedings. The time limit is often set in such a way that less complex cases can be solved in a short amount of time, allowing adjudicating officials to devote more time to more complex cases.

Let the qualified curated professionals at Flywork.io assist you to resolve any legal and allied issues. For more details visit us at Flywork.io.

References:

  1. Sections 55 to 58 of the Insolvency and Bankruptcy Code, 2016 and 
  2. Insolvency and Bankruptcy Board of India (Fast track Insolvency Resolution Process for Corporate Persons) Regulations, 2017.
    By Achyutha Bharadwaj

Land Bill Decoded

The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement (Amendment) Bill, 2015 was introduced in the Lok Sabha on February 24, 2015.  The Bill amends the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (LARR Act).[1] The 2015 Bill aims to alter the LARR Act, 2013 as it was criticised for strangling economic growth by making it difficult for the industries to acquire agricultural land.[2]

This Bill introduced some changes in the old Act but was passed by the Lok Sabha with some changes. The first major change that was introduced was regarding the consent required. The LARR Act, 2013 stated that consent of 80% of land owners was required for private projects, consent of 70% of land owners is required for public-private partnerships and no consent is required for government projects. The 2015 Bill exempted 5 types of projects from seeking consent and they are:

  • Defence
  • Rural infrastructure
  • Affordable housing
  • Industrial corridors
  • Infrastructure and social infrastructure including Public Private Partnership where the government owns the land.

The Lok Sabha passed this consent provision by excluding social infrastructure from the exempted category of projects. It also defined industrial corridors as those set up by the government/government undertakings, up to 1 km on the either side of the road/railway corridor.[3]

The second important point was the Social Impact Assessment (SIA). The LARR Act 2013 provides that SIA is mandatory for all projects except in cases of urgency or in cases of irrigation where an environment impact assessment is required. The Bill states that the government can exempt all those five categories mentioned in the consent clause from this provision as well by issuing a notification in the Official Gazette. Lok Sabha passed this provision with an addition that the government before issuing a notification should ensure that the land being acquired is being kept within the land required.[4]

The third important aspect is regarding the Irrigated multi cropped land. The LARR Act 2013 provided that the irrigated multi cropped land cannot be acquired without the limit specified by the government. The Bill allows the government to exempt projects falling under the five categories mentioned in the consent clause from this provision as well by issuing a notification to that effect. The Bill was passed by making the same addition as made in the SIA provision.[5]

The fourth important provision is regarding the compensation and rehabilitation & resettlement provisions of 13 other laws which govern land acquisition. The LARR Act 2013 excluded 13 other Acts from its ambit and also required that the compensation and rehabilitation & resettlement provisions given under these 13 Acts be brought in consonance with the LARR Act. The Bill does not bring about any changes with regard to this provision.

The fifth important aspect is regarding the retrospective application of the Act. The LARR Act 2013 provided that the Land Acquisition Act, 1894 would continue to apply in those cases where an award has been passed under the 1894 Act. However, if the award was made five years or more before the enactment of the 2013 Act, and the possession of land has not been taken or compensation had not been paid, the 2013 Act would apply. The Bill states that in calculating this time period, the following will not be included: (i) any period during which the process of acquisition was held up due to an order of a court; (ii) a period specified by a Tribunal for taking possession; and (iii) any period where possession was taken but the compensation was lying deposited in a court/designated account. This provision was passed unchanged.[6]

The sixth change was regarding the definition of ‘private company’ which was altered to private entity in the 2015 Bill. The LARR Act was applicable for the acquisition of land for private companies. The Bill changed this to acquisition for private entities. A private entity is defined as an entity other than a government entity, and could include a proprietorship, partnership, company, corporation, non-profit organisation, or another entity under any other law. This provision was also passed unchanged.[7]

The last change is regarding the provision of Offences by the government. The LARR Act 2013 had provided that if an offence was committed by a government department then the head of that department would be deemed guilty unless he can show that he had exercised due diligence to prevent the commission of the offence. The Bill deleted this provision and was passed as it is by the Lok Sabha.[8]

With these changes the Bill was passed by the Lok Sabha but the government was forced to refer this controversial land acquisition Bill to the Parliamentary Committee because of the opposition from other political parties. The government is open to all kind of suggestions and is sticking to its stand that it is a pro-farmer Bill.[9]

Ii is in fact a blessing in disguise that the land acquisition Bill is progressing slowly, since passing the Bill in haste harmful. There is no denying the fact that having a difficult procedure to acquire land makes it difficult for the industries to grow but the farmer’s interest is also to be kept in mind in a country like ours where the major population of the country is in the rural belt and is dependent on agriculture, animal husbandry and the like. The government should ensure that a balance is maintained between the interests of the industries and farmers. That is to say if the country hopes to become industrially sound and is aiming at the expansion of the industrial sector then land should be given to the industries but the farmers should also be adequately compensated for giving away their lands and not be left empty handed. One can hope that the government delivers what it promises, while the country awaits the Ache Din…!!

[1] The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement (Amendment) Bill, 2015, available at www.prsindia.org (last visited on 25 May 2015)

[2] Land Bill reintroduced in Lok Sabha, opposition walks out, Live Mint May 11, 2015, available at www.livemint.com (last visited on 27 May 2015)

[3] LARR (Amendment) Bill, 2015 as passed by Lok Sabha, available at www.prsindia.org (last visited on 25 May 2015)

[4] Supra note 3

[5] Supra note 3

[6] Bill Summary – The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement (Amendment) Bill, 2015, available at www.prsindia.org (last visited on 25 May 2015)

[7] Supra note 6

[8] Supra note 3

[9] Land bill referred to joint panel, Live Mint May 13, 2015, available at www.livemint.com (last visited on 27 May 2015)

By Arushi Malik

Essentials of a Sale Deed

  A sale deed is one of the most important documents in any deal involving housing or property. It is the document that proves one as the owner of the property. It is drafted when the sale is done and it is the one that completes the sale. It does so by transferring the ownership rights to the buyer. Provisions of the Transfer of Property Act, 1882, and the Registration Act, 1908 are the acts that govern the said sale deed. 

Now, once this deed is drafted and signed, the rights get completely transferred. Due to this, a sale deed is of paramount importance and it is essential that it is drafted in a well-organized and effective manner. Firstly, it is necessary to look at when a sale deed comes into the picture and to whom it is applicable. Simply put, the sale deed becomes essential when there is a sale of a property. It is thus applicable to both the seller and the buyer and acts as proof of transfer of ownership and hence, the ownership of the buyer. 

Sale deed and sale agreement are different terms

It is important to understand that a sale deed is not the same as a sale agreement. While the latter is merely an agreement to transfer the property later, the deed actually transfers the property. Naturally, for a sale deed, there are certain essentials that must be kept in mind to ensure that the deed is legally binding and to remove any difficulty which is dealt with below.

What are the essentials of a sale deed?

  • Details on parties: While drafting a sale deed, first and foremost, it is absolutely necessary to mention the name and the details such as an address, age, contact, occupation of the parties involved i.e. the buyer and the seller. It is a must that these details are bonafide. There must then be a description of the property with complete details on its dimensions, registration number, construction details, location, neighborhood, and so on. 
  • Consideration of sale: The sale deed must contain the exact consideration of the sale which is the price at which the property is being transferred. It must be mentioned in both words and numbers. Along with the same, the mode or method of payment must also be specified. Similarly, if the payment is being made in installments, full details on the same, the regular payment, and the time duration must be specified. There must also be complete clarity on the delivery of the property and how and when it shall be transferred. 
  • Other important clauses: Apart from the details of parties and consideration, there are certain details or ‘clauses’ that are must-haves in a sale deed. For example, there is a ‘Transfer of Title’ clause which is a key component as it expressly states the intent of the seller to transfer ownership of the property to the buyer. Further, Encumbrance clauses and Indemnity clauses are also essentials in this regard. The former is one that ensures that the seller has freed the property and hence the buyer of all existing charges like taxes, arrears, and so on. If there are any such charges, the indemnity clause takes effect as it indemnifies the buyer against them as well as any legal dispute relating to the property arising due to the prior actions of the seller.
  • Default clause: Finally, a sale deed must contain a default clause were details on how the penalty has to be paid by either the buyer or seller on defaulting can be elaborated. It can also include details on how to resolve disputes arising out of the same. 

Apart from these, there can be various other details and clauses that can be added as long as they are legally valid and fair. All of the aforementioned essentials must be kept in mind and included while drafting a sale deed.

The sale deed is of huge importance and therefore must be drafted by a legal personnel

The sale deed is of huge importance as it is a legally binding document that acts as proof of ownership. Since it contains a plethora of details on the transfer of the property, it provides clarity to not only the parties themselves but also to others who could be interested in the same such as an investor in case of resale. Thus, such a valuable document requires utmost care in drafting. Lapses in drafting could have huge repercussions and to avoid such a situation, care is required. This is exactly why drafting must be done preferably by legal personnel who are trained in doing it. 

By Nevin Clinton

Registration of a Sale Deed

A sale deed is a legal document that enables a party to transfer property from one person to another. It is defined under Section 54 of the Transfer of Property Act, 1882 as; “Sale” is a transfer of ownership in exchange for a price paid or promised or part-paid and part-promised. Thus without a sale deed, there would be no evidence to attest the transfer of a property, further there would be no evidence to facilitate subsequent transfer of the property.

Registering a Sale Deed

In order to register a sale deed the following steps have to be undertaken:

  1. The value of the property has to be estimated based on the circle rate (minimum value set by the state government’s revenue department or the local development authorities at which the sale can occur) in that area.
  2. The circle rates of the area and the actual price paid for the property are compared. While calculating the stamp duty the higher of the two values, i.e., the circle rate and the actual price paid, has to be taken into consideration. Non judicial stamp paper of the value so calculated has to be purchased thereafter.
  3. Subsequently, the deed has to be prepared and typed in stamp papers.
  4. The final step involved for getting the sale deed registered is to approach the Sub-Registrar’s office in order to get the sale deed registered. The parties must be accompanied by two witnesses.

Key Components of a Sale Deed

The essentials that one must keep in mind while preparing a Sale Deed are the following:

  1. The Sale Deed must be classified as either a ‘Deed of Sale’ if the property is being sold, or as ‘Deed of Mortgage’, if the property is being leased or mortgaged.
  2. The Sale Deed must contain accurate information pertaining to the sale. A Sale Deed is said to be void if it does not contain the correct information of the buyer and the seller.
  3. The Sale Deed should have relevant information so as to enable a person, identify the immovable property which is the subject matter of the deed.
  4. A Sale Deed is incomplete if it is not accompanied by a Sale Agreement. The Sale Agreement contains all the terms and conditions that have been agreed to by the buyer and the seller.
  5. Finally, the Sale Deed must also contain the Proof of Registration of the property.

    By Asmita Rakhecha

Property Buyer and Consumer Relief under RERA against Builders for Real Estate Dispute

RERA, Real Estate Regulatory Authority popularly known as RERA is a newly implemented law – THE REAL ESTATE (REGULATION AND DEVELOPMENT) ACT, 2016 to ensure sale of plot, apartment of building, in an efficient manner and to protect the interest of consumers in the real estate sector. It also ensures a dedicated and speedy redressal mechanism.

What is the purpose and why did it come to place?

The act proposes and aims to create transparency in the real estate related transactions and to safeguard the consumer’s interests. This act is applicable to all the states within India excluding the  state of Jammu & Kashmir. To ensure a speedy dispute redressal mechanism.

Why do you need a lawyer for filing a Complaint?

A well drafted complaint can make your respresentation stronger and can help the tribunal to undertand your grievances better. A lawyer always ensures that during the drafting as well as the argument stage the content of the complaint, legal grounds and the arguments are enunciated in a manner which makes your case stronger and clearer. The complainant might not be able to do the same themselves and hence they need a lawyer to represent their case.

When can you file a complaint?

Any homebuyer who seeks redressal for their grievances are welcome to file a complaint with the RERA. The problems which a homebuyer generally faces with the builders are as follows:

1. Delay in delivery of possession of the property

2. Mismatch in the guise of floor area & carpet area

3. Misrepresentation of design and construction parameters

4. Malpractices like improper amenities, ceiling leakage, improper drainage system, incomplete fire safety system, low quality of electrical wiring, improper water provisions.

5. Not providing occupancy certificate, or

6. any other deficiency in service

If one is facing, any of the abovementioned grievances, they can easily approach the forum to seek redressal.

Who can file a complaint with RERA and against whom can the complaints be filed? 

Any aggrieved home buyer or the consumer under the ambit of RERA can bring a lawful suit against the developer or the promoter.  The documentary procedure to file a complaint is represented below :

How can we file a complaint with RERA?

Filing complaint before Adjudicating Officer of Regulatory Auhtority

Duly filled “Form M” along with a fee of Rs. 1,000 paid using a demand draft payable where the seat of the said Regulatory Authority is situated[3].

Filing an appeal before Appellate Tribunal

Attested true copy of the order  alongwith duly filled “Form L” along with a fee of Rs. 1000. The composition of the authority is :- Chairman + 3 members ; Chapter X of the act.

How is the interest to be paid calculated in RERA matters, as per the RERA guidelines? 

Instead of an algorithm or a calculation on the rate of interest to be charged under the RERA guidelines, it is rather fixed and changes as per the SBI rate.

Approximate Rate of Interests :-

State Bank of India Prime Lending Rate plus two percent (paid by the promotors and the allottee).

How is the interest calculated when there is already a clause for liquidated damages, in the Agreement to sell between the parties.

It is the duty and obligation of the promotor/developer to obey and be governed by the terms and conditions of the agreement signed by him/her in lieu of the sale of the said apartment. Failure to obey such terms will make him liable for an action under the RERA act. Meaning thereby, that the sale agreement terms will take precedence over the default conditions set under the law until and unless the agreement stands in contravention to the RERA act.

How to determine the jurisdiction while filing the complaint?

Filing a complaint under RERA is governed as per the simple Civil Procedure code concept of Territorial Jurisdiction i.e. to be filed before the adjudicating officer of the area where the project/home lies or where the cause of action arose.

GST for Real Estate in India

GST for Real Estate

Akin to the country’s first Jawaharlal Nehru who had given the ‘Tryst with Destiny’ speech at the stroke of midnight on August 15, 1947, the current Narendra Modi government also chose the midnight of June 30 to have a tryst with GST.

Real estate sector being the most pivotal ranks second just behind agriculture.

GST shall bring a lot of transparency in the real estate sector and minimize unscrupulous transactions. 

Now whether this benefit gets passed on to the end-consumer is unsure as pricing of real estate is driven by market forces than on costing principles.

Effective GST rate on under- construction real estate projects will be 12 per cent only.

The government had hiked the GST rate for the construction sector to 18 per cent from 12 per cent but removed land value from computation of tax liability.

According to Finance Minister Arun Jaitley, the products placed under the 28 per cent tax slab would not adversely impact the lower or middle class. 

Cement will be taxed at the rate of 28% under GST. It is higher the current average rate of tax around 23-24% but a lot of additional taxes charged over the average rate would be subsumed under GST.  Iron rods and pillars used in the construction of buildings is charged at the rate of 18% which is similar to the current average rate of 19.5%.
Bricks used in the construction of buildings and houses is taxed under GST at the rate of 28% except for the rate of ceramic building bricks which is kept under 5%. Currently, all bricks except the ceramic bricks are charged an average tax rate of 25-26% inclusive of all state and central level taxes. Logistics cost of transportation of bricks, cement or iron is going to reduce through the subsuming and streamlining of taxes

There is an positive & more sort of initial opening bumper for the reformative Modi Government when the
Stock Exchange Markets Hit Bright Spot.
The Stocks Opened at Above 31,000 on Monday 3rd july due to overall global appreciation of Modi Govt GST by Foreign Finance Index of Asian, US & European Countries claiming that no modern government in the entire World could ever be as bold as ours.

But, the procedures of filing returns in new GST regime are bound to be cumbersome, with businesses expected to file at least 37 returns in a year. This will be multiplied several times depending on the number of states in which one is transacting a business. 
Although this cannot be deemed simple in any sense of the term.
But, its true that,
Developers/Builder’s and Contractors would reap the benefit of many taxes which will be subsumed by GST.

Conclusively saying, there is going to be a substantial benefit from GST as it will bring a lot of required transparency and accountability. 

Do celebrities owe us a duty for the claims they make in advertisements?

Celebrities owe us a duty for the claims they make in advertisements

The favourite midnight snack of many, Nestlé’s Maggi has been banned by the Food Safety and Standards Authority of India (FSSAI) because of problems associated with the quality and labelling of the product. The notices issued to various celebrities who had been endorsing Maggi noodles and the orders for lodging FIR against them have reignited an extremely important legal debate concerning the liability of celebrities for the product endorsements they make. This article discusses the duty of celebrities for their endorsements, relevant laws in India and the precedents in some other countries.

Making a case for celebrity endorsement

There are many questions which crop up when we seek to make celebrities liable for their claims in advertisements. First among them being do the people actually believe in the claims celebrities make? Are the products bought because of endorsements or are they bought first and endorsements only reassure the consumer? Well, there is no straitjacket formula to these questions unlike believed by some. It certainly depends on “the context, the product or service endorsed, the expertise of the celebrity in that area, the mass appeal of the celebrity and the reliance of individual consumer”. This brings us to a more nuanced argument. Does the fact that celebrities have a right to publicity which they harness economically while advertising, impose a duty on them to not use this right in a manner detrimental to the general public? Or since the celebrities have a right to publicity, the audience has a reciprocal right of reliance? After all, unlike the movies, the fact that the plot and characters are fictional is never reflected/shown in an advertisement. In fact the representations made by the likes of Ms. Padukone are a “cause in fact” of the pecuniary loss to the consumers to the extent of the difference between an effective gym equipment for losing one’s weight and the Kellogg’s Special K. Similar arguments can be made for every misleading advertisement. Some make a superficial distinction between the celebrities giving personal testimonies versus the celebrity playing a role in the advertisement, for instance Ms. Dixit is playing the role of a mother in the Maggi advertisement. It is argued that a celebrity should be liable only when (s)he is making a personal testimony and not when (s)he is playing a role of another. However, it is extremely difficult to accept this difference. Audience generally does not think this way when relying upon the claims. Further, as stated above, unlike films, the fictional and impersonalized role is not emphasized in advertisements, thus making no space for this argument. Another argument put forth by the people disagreeing with making celebrities liable is based on the fact that celebrities have to no way in which they can identify the truthfulness of the statement which they are made to say in the testimonial by the ad-gurus. However a simple counter to this is requiring celebrities to test, try and experiment the product to find out. Similar has been legislated upon in various countries as we will see in the next section. While this may sound a little far-fetched in the case of Maggi noodles, after all, checking the amount of lead is the duty of the FSSAI and not Ms. Dixit’s and every single pack can certainly not be checked by the celebrities, yet celebrities can certainly be made liable for making sweeping claims like a person drinking Drink X can grow twice as taller as (s)he would grow drinking Drink Y (the ad for the health drink Complan). Therefore, there remains a strong case for making celebrities liable.

What are our neighbors and partners in trade doing about it?

In the USA, the Federal Trade Commission Guidelines prohibit deceptive and misleading endorsements by celebrities and make celebrities liable for the same. The endorsers are required to reflect their “honest opinions, findings, beliefs, or experience” in the advertisements. In fact, the advertisers can continue to use the endorsements only as long as the advertiser has a good reason to believe that the endorser continues to remain a bona fide user of the endorsed product. In Europe, the celebrities follow a self-imposed code whereby they refrain from endorsing products harmful to the health of the general public like alcohol, medicines etc. Korea on the other hand has an Advertising Self-regulation Institution which issues guidelines with respect to endorsements and reviews the endorsed advertisements making false advertisements a rarity. Among our neighbors, China makes the endorsers jointly liable with the service provider for the harm caused by the product. Pakistan also has laws forbidding false and misleading advertisements, however it is uncertain whether these laws will also include liability of celebrities for their endorsements. The Malaysian Code of Advertising Practice requires that the endorsements or testimonials contained in advertisements should be based on genuine experience of the endorser over a period of time. Malaysia also has special guidelines for “[p]ersons, characters or group who have achieved particular celebrity status with children”. These celebrities are forbidden from promoting food or drinks in a manner that may undermine the need for a healthy diet however the endorsers are not liable for the same since sanctions are in the form of “withholding of advertising space from advertisers and the withdrawal of trading privileges from advertisers/ advertising agencies”. Singapore has similar laws  relating to false advertisements and is also cogitating to put into place specialized guidelines pertaining to children. In Japan on the other hand celebrities participating in false endorsements are made to apologize publicly. This harms the reputation of the endorser decreasing the employment opportunities of these people, forcing celebrities to refrain from making claims with regard to the quality or effectiveness of a product.

What is the law in India?

Section 24 of the Food Safety and Standards Act, 2006 puts restrictions on misleading advertisements. It states, that “no person” shall be allowed to engage in misleading representation concerning the “standard, quality, quantity or grade-composition” and “need for, or the usefulness” of a food product. (S)he should not make any statement which “gives to the public any guarantee of the efficacy [of the product] that is not based on an adequate or scientific justification thereof.” Section 53 of the Act describes the penalty for such false advertisements which can extend to ten lakh rupees. This penalty applies to “any person” and hence should ideally include the celebrities; however there is no case law to support this proposition. The Central Consumer Protection Council (CCPC) has also decided to issue specific guidelines to this effect after the MP High Court directed to set up an advertisement monitoring panel as per the Vibha Bhargava Commission. These guidelines if enforced will allow consumers to claim compensation from celebrities for misleading claims made regarding a product, recklessly or with knowledge that the claim is false.

Conclusion

The case for celebrity endorsement is a strong one considering the status which is accorded to the claims made by these stars and the money which is used in these endorsements. This has been understood across the world and many countries have laws to the effect of punishing celebrities for misleading claims. Indian laws are also developing in this regard and stars in India are becoming more aware with respect to the duty they owe to their fans. For instance recently Amitabh Bachchan stopped promoting Pepsi after a young girl questioned him as to his reasons for endorsing Pepsi which her teacher had termed as poison.

By Ayushi Singha

Role & Duties of RTA Towards Investor, Distributor and MF Houses

Maintenance of records of investor’s transactions holds utter value for any mutual fund house because that should be as accurate and as updated as investors expect it to be. If the contrast of this happens, that puts a big question mark before the work and reputation of mutual fund houses.

So, for the professional and errorless management of such records of investor’s transactions, Mutual Fund Houses appoint an intermediary -Registrar and Transfer Agent, who can carry out such tasks on its behalf.

RTA refers to a regulatory body who takes on the responsibility to upkeep records of investor’s transaction, update their personal information, notify them about the latest offers & schemes and so on to aid mutual fund house. At the same time, it facilitates investors as well.

Why Registrar and Transfer Agent (RTA) has become a must-have for any mutual fund house as well as for investors

Registrar and Transfer Agent (RTA) upkeep transaction records, issue or revoke certificates, takes care of emails & messages, deal with client’s queries, resolves investor’s issues like damage or stolen share certificates and so on.

Alongside the same role, RTA takes care of the timely payment of dividend to the investors, the conduct of mutual funds, maturity dates along with other factors of investors’ interest and ensure that monthly investment statement is accurate with correct details about the units, dates, etc.

Transactions, like buying, selling and switching of shares, are carried out by investors frequently with the help of RTA. Registrar and Share Transfer Agent notifies the investors about profitable schemes and offers and also guide them to make investments that would reap financial benefits. The whole process of investment or transaction that involves an array of activities like filling of the form, buying & selling of shares become as simple as icing on the cake with the help of RTA.

Registrar and Transfer Agent Services to Mutual Fund Associates

The role of a Mutual Fund whirls around its Distributors, Investors, Mutual Fund Company.

Distributors

The distributor refers to an individual or an organisation which educates investors about investment schemes with maximum interest for him/her after due analysis of various investment plans and investor’s risk profile and the congeniality among the two. When a distributor sells a mutual fund to the investor, he gets his commission on profit.

Role of RTA: Registrar & Transfer Agent provides necessary documents and materials like application forms to the distributor which he needs to facilitate the investors to make mutual fund transactions. Besides, RTA also releases distributors sales statements in a respective month.

Investors

Investors are those individuals who are capable of or are willing to make investments in the mutual fund houses by buying securities, bonds and shares. Investors have a sole intent to earn profit from investments made in mutual funds. 

Role of RTA: RTA Agent apprise the investors with the latest investment schemes, maturity dividend payout and other important updates. RTA also makes sure that dividends are distributed to the investors on time and also aids them in executing mutual fund transactions.

Mutual Fund Companies

A mutual fund house or MF company refers to the financial institution which collects money from potential investors and puts it in securities, shares or bonds. Such financial entities work intends to yield substantial profit for its investors in the future dates. 

Role of RTA: RTA Services proficiently maintain the records of investor’s transactions along with other details on behalf of investors. RTA fulfils the multiple needs of mutual fund houses through its diversified branches at different places. This ultimately saves time, efforts and resources of mutual fund houses which can be invested in other more productive tasks.

 Registrar & Transfer Agent provides tailor-made solutions to the mutual fund houses that leave nothing to seek more. In the digital era, every task happens digitally backed by digital communication which has knocked off the need to set up a branch of MF house nearby RTA office.

By Sag Rta